Key Takeaways
Even though your Roth contributions are taxed up front, the employer match is treated like a traditional (pre-tax) contribution, meaning you’ll pay taxes on that portion when you withdraw it in retirement.
Under the SECURE 2.0 Act, employers may now match into Roth accounts (rather than only into traditional accounts), but it’s optional, not mandatory – and if they do, the match is taxed when allocated.
If your employer match is designated as Roth, that match must be fully vested before it can be treated as Roth; until you’re fully vested, it’s taxed as traditional, and reporting uses Form 1099-R with code “G”.
What is a Roth 401k Employer Match?
A Roth 401(k) employer match is a unique feature offered by some employers as part of their benefit packages. It works like this: when you contribute to a Roth 401(k) account, your employer may match a portion of your contributions, typically up to a certain percentage or dollar amount. This is deposited directly into your Roth account.
Roth 401(k) Contribution Limits
There are maximum contribution limits for Roth 401(k) accounts which are adjusted annually for inflation. For 2025, your personal contribution limit is $23,500, which is an increase of $500 from last year. If you are aged 50 to 59, or 64 and older, you can contribute an additional $7,500. For those between 60 and 63, you can contribute an additional $11,250 in 2025. This is known as a “catch-up” contribution.
Although your employer match does not count toward your personal limit, there is a combined limit of either $70,000 or 100% of your salary, whichever is lower. This does not include your catch-up contribution.
How Does a Roth 401(k) Match Differ From a Traditional 401(k) Match?
With a traditional 401(k) employer match, both your contributions and the employer’s match are made on a pre-tax basis. You pay income tax on the entire amount only when you withdraw funds during retirement.
Roth 401(k) matches work a little differently. Your contributions are taxed immediately. This allows you to withdraw during your retirement tax-free if you’re 59 ½ or older and it’s been 5 years since your first contribution. Before the SECURE Act 2.0, however, employers had to create a traditional 401(k) for their match contributions. Now, they contribute directly to your Roth account. The one big difference is that your employer’s match is not taxed. It’s treated just like a traditional 401(k) match. This means you’ll be on the hook for any taxes due.
What Taxes Will I Owe?
If you’re required to file a state income tax return, you’ll need to pay both state and federal income taxes on the match amount. You should receive Form 1099-R, which will show the amount contributed by your employer. This should be included as ordinary income when you file your returns.
Depending on your income level and tax bracket, the additional taxable income from the employer match could potentially push you into a higher tax bracket, resulting in a higher overall tax liability for the year.
When & How Do I Pay The Taxes Due?
There are several ways you can pay the taxes due on your Roth 401(k) employer match.
- Wait until you file your tax returns and pay the additional tax at that time (state and federal).
- Make estimated tax payments throughout the year to avoid a larger tax bill when you file (state and federal).
- Increase your paycheck withholding by updating your W-4 with your employer.
If you choose option 1, just be aware that you may be assessed an underpayment penalty if the taxes due exceed $1,000. To avoid this penalty, pay either 90% of the tax due before the end of the tax year, or 100% of the previous year’s tax, whichever is less.
It’s essential to carefully evaluate your circumstances and consult with a tax professional to determine the most appropriate option for your situation.